Kelly McParland: What the U.S. economy needs is to be left alone

What the U.S. economy needs is to be left alone

If you’re rooting for a stronger economy to emerge from Tuesday’s U.S. elections, the best result might be a tie, followed by an extended court challenge that keeps the outcome uncertain for several months to come.

It’s not inconceivable. Though President Barack Obama appears to have the edge, with thin but persistent leads in several crucial states, there are several calculations by which former governor Mitt Romney could produce a tie in the Electoral College. Result: no decision, and months of arguing. That, if you consider the state of the U.S. economy as reported in an election-eve Bloomberg News article, might be best for everyone.

No matter who wins the election tomorrow, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.

“The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up.

According to Eric Green of Penn Capital Management Co., growth “will surprise to the upside,” the article says. “We could grow at a 3 to 4 percent rate over the next couple of years.”

The latest good news was a jobs report last week that showed hiring has picked up, with more jobs added in October than analysts expected. Unemployment remains a problem, though it has finally fallen (barely) below 8%. There are concerns as well in the slowing economic activity in China and the never-ending crisis in the European Union, but there is a sense of optimism that, if left to itself, the U.S. economy will finally begin to show some real progress over the next two years.

Which is why the election comes at a bad time. The worst that could happen now would be for Washington, which has largely been diverted by a year of all-out campaigning, to start meddling again. Romney, running largely on the basis that the economy is a mess and he can “fix” it, has an ill-defined plan that would boost military spending, cut taxes and remake healthcare spending again. Having made that the centrepiece of his claim on the White House, he could hardly avoid trying to implement it.

Obama appears to have no plan at all. Having focused most of his re-election bid on an effort to demonize Romney for the sin of being rich, he’s largely avoided offering any specific recipes for a second term, arguing that what’s needed is time for his policies to mature. The Republicans have attacked him as a result, charging he has no new ideas and the next four years would be as bad as the past four.

Oddly enough, though, doing nothing in the circumstances might be the most appealing option. Conservative pundits regularly argue that less government is just the cure for the economy — that, left to its own devices, it will eventually adjust to the damage inflicted by the politicians and heal its own wounds.

That being the case, a do-nothing Democratic White House has an unusual attraction. The one serious threat on the horizon is the “fiscal cliff” – the budget deal that is timed to take effect at the end of the year unless Congress and the White House act to stop it. No matter who wins, it’s likely both parties will see the sense in avoiding that eventuality. “It’s not going to happen,” Obama said during his three debates with Romney, reflecting the belief that any party that blocked a compromise to prevent it would pay a heavy price down the road.

If the forecasts are borne out, the winner of tomorrow’s vote will be able to claim credit for the improvement, no matter how little he actually does to bring it about. If it’s Obama, he can claim vindication for the policies that were so harshly attacked by his opponents. If it’s Romney, he can declare that he saved the country from the Democrats. So there is no strong motive to actually act; they’ll get the benefit anyway.

That being the case, the less meddling the better. Barring a last-minute pledge by Mr. Romney to hold off on his economic plan until he can see whether it’s still necessary, the best result appears to be no result. A tie. Followed by enough time for nature to take its course.